1.

Introduction

This report aim to analyze the international supply chain networks of McDonald mainly in
Pakistan. McDonald’s is one of the best brands known worldwide and world’s largest chain of
hamburger fast food restaurants, serving more than 50 million customers daily. Company started
in year 1940 by Dick and Mac McDonald in San Bernardino, California, USA. They have spread
across 117 countries and operate around 32000 restaurants worldwide employing 1.5 million
people. They serve around 60 million customers per day. McDonald's Pakistan opened its doors
in September 1998 at Lahore and presently operating in seven major cities with a network of 23
restaurants. McDonald's Pakistan is a part of the Lakson Group of Companies, with a Head
Office in Karachi and a regional office at Lahore. McDonalds located in Pakistan are currently
employing about 1,200 Pakistanis. McDonalds has investment of over Rs300 crore in the
country.

2. International Business Strategy

This section will cover the international business strategy of McDonald in Pakistan. International
markets are highly competitive because of the freedom of world trade and investment
environment. Any firm which gets involved in the international business has to choose an
international strategy to face international competition. There are four strategies to enter and
compete in international markets naming multi-domestic, international, transitional and global
strategy. Each strategy differs from other on the bases of cost pressure and local responsiveness.

Cost reduction pressure can be benefited by primary activities like R & D production, marketing
and sales and services. Other activities can include location of economies by instituting the
firm’s production in an area where the cost is at lowest. Meanwhile, cost of transportation should
be considered before initiation of production. Cost can also be reduced by learning effects and
economies of scale.

McDonald peruses the international strategy attempting to create value by transferring core
competencies from home to foreign courtiers. It derails in the franchisee system and maintains a
very strong culture by keeping all the major decisions in the centralized control of head office.
Physical structure, most of the brands, outlook, self-service system, and environment are almost
the same in all the franchisees around the world. Therefore, it has a very common organizational
culture.

McDonald's Corporation serves about 47 million customers daily and sells hamburgers,
cheeseburgers, chicken products, French fries, salads, breakfast items, soft drinks, desserts and
milkshakes and fast-food is the core competency of McDonald.

McDonald's Pakistan has developed a special menu with vegetarian selections to suit Pakistan
tastes and preferences. McDonald's does not offer any pork items in Pakistan. Only the freshest
chicken, fish and vegetable products find their way into our Pakistan restaurants. Among these
are McVeggie™ burger, McAloo Tikki™ burger, Veg. Pizza McPuff™ and Chicken McGrill™
burger. We've also created eggless sandwich sauces for our vegetarian customers. Even our soft
serves and McShakes™ are egg-less, offering a larger variety to our vegetarian consumers.
McDonald's Pakistan's local suppliers provide us with the highest quality, freshest ingredients.
Complete adherence to the Pakistan Government regulations on food, health and hygiene is
ensured, while maintaining our own recognized international standards.

3. Global Supply Chain Strategy – Efficient or Responsive

This section will communicate whether MCDONALDS has an efficient or a responsive supply
chain trade-off. Perspective of efficiency and responsiveness is whether the product is functional
or innovative. Fisher (1997) claim that products in an efficient supply chain are functional
products, while products in a responsive supply chain are innovative products.

Only 15% of the total number of restaurants is owned by the Company. The remaining 85% is
operated by franchisees. The company follows a comprehensive framework of training and
monitoring of its franchises to ensure that they adhere to the Quality, Service, Cleanliness and
Value propositions offered by the company to its customers and quality across geographies.
McDonald's restaurants offer both counter service and drive-through service, with indoor and
sometimes outdoor seating. Drive-Thru, Auto-Mac, Pay and Drive, or McDrive as it is known in
many countries, often has separate stations for placing, paying for, and picking up orders, though
the later two steps are frequently combined; it was first introduced in Arizona in 1975, following
the lead of other fast-food chains. Especially themed restaurants also exist, such as the "Solid
Gold McDonald's," a 1950s rock-and-roll themed restaurant. In Victoria, British Columbia, there
is also a McDonald's with a 24 carat (100%) gold chandelier and similar light fixtures. The site
of the first McDonald's to be franchised by Ray Kroc is now a museum in Des Plaines, Illinois.

To accommodate the current trend for high quality coffee and the popularity of coffee shops in
general, McDonald's introduced McCafés.

McDonald’s Market Share in Pakistan

4. Elements of Global Supply Chain

This section will look at the different components of McDonald’s global supply chain and
explain how the company can achieve the global supply chain strategy trade-off.

4.1. Facilities
They are the actual physical location in the supply chain network where the product is stored,
assembled, or fabricated. The two main facilities are production sites and the storage sites. Venus
has 2 ware houses, one in Karachi and other in Lahore. From Lahore they distribute the supplies
to other different cities near to Lahore. The company generates its own power by way of 2 x 390
KVA generators at each location thus ensuring a constant temperature of –22°c at all times
below is the specification of their warehouses.

 120,000 sq ft warehouse at Maripur Karachi

 60,000 sq ft warehouse at Rawind road Lahore
 12,000 sq ft of world standard Freezer/Cold Storage facilities in Karachi
 8,000 sq ft of world standard Freezer/Cold Storage facilities in Lahore

The group head office is in Karachi with a nationwide distribution network that is managed in
coordination with our regional offices in Lahore, Hyderabad and Islamabad. The address of
Karachi head office is 9/1, K-28, TRANS LYARI HAWKSBAY ROAD.

McDonald outlets:

McDonald has many outlets in following cities of Pakistan

 Islamabad
 Rawalpindi
 Faisalabad
 Sialkot
 Karachi
 Hyderabad
 Lahore

4.2. Inventory

It includes raw materials, work in progress, and finished goods within a supply chain. Venus
distributor usually keeps the stock for 1 month and 45 days. There are 2 ware houses 1 in Lahore
and 1 in Karachi. They usually keep McDonalds supply in Frozen (-18 to – 22 degree), chilled (0
to 4 degree) and dry rooms as required by the product. At McDonald's, all raw materials, work-
in-progress and finished products are handled on a First In, First Out (FIFO) basis. This means
raw materials are used in the order they are received. Therefore stock is always fresh because
products are sold in the order they are made. If the process First In, Last Out (FILO) was used,
then the finished product would be dry and unappealing because the first one prepared is the last
one sold.

4.3. Transportation

It is the process where the inventory is moving from place to place. Refrigerated vans are used
here in this case. For McDonalds Pakistan they maintain a good fleet for containers they use 40 ft
and 20 ft fleet which they use in transferring containers from port to their ware house. On the
other hand they have a reefer express fleet which they use for transferring McDonalds food
ingredients to their retail outlet in order to maintain a good – 22degree temperature while
delivering. Venus provides the transfer of all the goods of McDonalds from the port to their ware
house and then they are responsible to provide the retail outlet with all the supplies on time.

4.4. Information

It includes data and analysis related to facilities, inventory, transportation, cost, prices and
customers in the whole supply chain. Previously they used American software which was used
by McDonalds globally and these were provided by McDonalds international to them. Later on
they found out that Siza foods need to customize the software because the previous software’s
not meeting their demand. So now they have made their customized inventory control software
which is not having any specific name for them.

4.5. Sourcing

It refers to who will perform which activity (production, storage, transportation, and distribution)
in a supply chain.

International

 Palm oil From Malaysia (Cargil palm products)

 All kinds of machinery and other equipments from America
National

 Packaging (Previously the packing was imported from Kuwait and now Siza foods is
depending on Pakistan to manufacture the packaging for their food items.
 Cream and the milk are provided to McDonalds by nestle, which is used in making
coffee, ice creams and other items.
 Ketchups, Maya sauce and other sauces (big mac sauce etc) from unilever Pakistan.
 Bread and buns rarely from dawn bread. Now they use buns from their own bakery.
 For one of their product they have started using chicken patty from K&N.
 Even the coffee is provided to them by nestle.

4.6. Pricing

McDonald's also believes in value to the customer, that is, why prices are value oriented as Amin
Mohammad Lakhani put it in his word, nothing sells forever unless it is value for money.

5. Global Distribution Network

This section will explain the global distribution network design of the company by integrating
the elements of global supply chain. Firstly it will focus on the primary products. Secondly, it
will focus on the value-added products.

Primary activities

 R & D production
 Marketing
 Sales and services.

Other activities

 Location of economies by instituting the firm’s production in an area where the cost is at
lowest.
 Cost of transportation should be considered before initiation of production.

6. Innovation
On-going product innovations are also a big challenge for the supply chain of McDonald. The
continue innovation of the products at McDonald require them to continuously alter the supply
chain and manage it accordingly. With the ongoing introduction of new products like new
burgers and items require. McDonald’s Supply Chain those to continuously update the supply
chain which requires supply chain management to be much more extensively used.

7. Recommendation

 Market Development
 Diversification
 Product Development

References

www.mcdonalds.com

www.mcdonalds.com.pk

www.slideshare.com

http://www.docstoc.com/docs/

http://www.scribd.com

Case study of managing stock to meet customer need by McDonalds

https://www.google.com.pk/search?q=cold+chain+logistics+of+mcdonalds+in+pakistan

By Alan M. Rugman (2008),The Oxford Handbook of International BusinessPP:352-380

Charles WL Hill, (2007) International Business PP: 410-490

About McDonald's 2009 www.aboutmcdonalds.com/mcd/our_company/mcd_history.html

Accessed on May 25, 2009
 By Robin John, Grazia Ietto-Gillies, Howard Cox, Nigel Grimwade Global Business
Strategy - PP: 237 -256

MCDONALDS SUPPLYCHAIN STRATEGIES 

One stop shopping concept 

Central file management 

Inventory management 

Restaurant simplification

Synchronizing the perishable Supply Chain

1. Demand forecasting 
2. Promotional + Continuous Supply 
3. Restaurant and DC level 2.
4. Supply Planning 
5. Restaurant and DC level 3.
6. Visibility and Collaboration across the chain
MACDONALDS PAKISTAN SUPPLY CHAIN: Diagram